Tripartite agreement of 1936
International monetary relations have continually world politics and economic ties among countries throughout history. Since no economy is independent, many nations relied on intergovernmental treaties for sustenance. Thus, history is replete with agreements, which had far-reaching effects on the future of some economies. Importantly, some of the agreements led to adoption of institutions, which still have meaning to-date. In this essay, we shall discuss the tripartite agreement of 1936.
What was the Tripartite Agreement of 1936? The international monetary deal brought together France, Britain and the United States. The main purpose of the agreement was to strengthen their currencies, both in their home countries and in foreign exchange. What necessitated this move? The suspension of the gold standard by England and the U.S in 1931 and 1933 respectively, largely contributed to the need to stabilize the currency. After their move, there was currency imbalance between gold bloc countries and non-gold bloc nations. This was more evident with France, which was still in the business of gold. Back in England and America, there were two opposing sides on how to manage currency. The first group was for sound money advocates, you strictly supported the need for stabilization.
The opposing side supported demonetization of gold coupled with proper management of the currency. Gold bloc countries also supported the move to stabilize the currency of the negative impact the sterling and dollar were having on their economies. The two currencies were fluctuating and affecting the exchange value in the gold bloc. There was also the fear of devaluation among gold bloc countries. This was based on high import prices and low export rates in England and the U.S. To avoid this, currency stabilization among leading international monetary lenders was paramount. Despite the Tripartite agreement, France went ahead to devalue its currency. Through the agreement, the three world economic pillars and top international lenders agreed to shun competitive depreciation even in their quest to gain competitive advantage in the economic world. They further agreed to maintain their currencies at their present levels as long as this would not affect their internal economic prosperity.
In understanding the Tripartite Agreement of 1936, it is important to appreciate that the period before the treaty world economies had experienced Great Depression. This was a time of economic warfare as different countries wanted to show their might and outshine their rivals through whichever means, regardless of the effects. This period was also a prelude of the military battles and hostilities that would follow and transform the world history. Additionally, the international monetary market was free, with no restrictions. However, after the Great Depression, the aftermath was characterized by shattered public confidence in the economy. A wide range of challenges faced the world, with countries employing all available tools that would offer solutions. Exchange rates were alarmingly fluctuating. On the other hand, different countries were involved in competitive depreciation in order to tame unemployment in their respective countries and deal with the issue of payments. Thus, the Tripartite Agreement of 1936 was timely in stabilizing the world economy through managed currencies. It was also vital to restore consistency in International monetary links.
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Retrieved from:
http://fraser.stlouisfed.org/docs/historical/brookings/17628_03_0006.pdf
http://online.sfsu.edu/jgmoss/PDF/635_pdf/No_10_Cohen.pdf